Abstract
Background: Informal businesses are important drivers of economic growth, especially in developing countries. These informal businesses often do not survive their first year of existence, with anecdotal evidence citing various challenges from the business environment.Aim: This study explored the influence of business environmental challenges on the growth of informal businesses in Uganda.Setting: There are various challenges from the internal and external environment that impede the growth and survival of informal businesses in Uganda. From the internal business perspective, informal businesses have poor business processes and do not have proper business strategies on which to focus their business growth strategies. From the external environment perspective, informal businesses do not understand their suppliers adequately. In addition, there is a lack of research on the relationships between internal and external business environments and the growth of informal businesses.Method: Primary data were collected from 383 informal businesses using a self-administered questionnaire. The data were analysed using descriptive statistics in SPSS 21.0 (Statistical Package for the Social Sciences), while the relationship between the variables was determined using Pearson’s product moment correlation coefficient and tested using regression analysis and analysis of variance (ANOVA).Results: The results showed that there was a significant positive directional relationship between the internal environment and the growth of informal businesses. However, there was a negative significant directional relationship between the external environment and the growth of informal businesses.Conclusions: Informal businesses should pay more attention to the internal environment and appropriate strategies should be developed and implemented to ensure their growth.
Highlights
Informal businesses are regarded as important drivers of economic growth, especially in developing countries
A weak negative significant correlation existed between the external environment and growth of informal businesses (r = -0.100; p < 0.10)
The results suggest that the external environment presents challenges that impede the growth of informal businesses
Summary
Informal businesses are regarded as important drivers of economic growth, especially in developing countries. This is evident when one considers that the informal sector in Uganda contributes 49% of the gross domestic product (GDP) of the country (Kasemiire 2017:2) These informal businesses contribute to the production of goods and services, provide employment and are regarded as the livelihood for the poor (Deen-Swarray, Ndiwalana & Stork 2013:1). Despite their importance, anecdotal evidence shows that informal businesses in Uganda do not exist longer than a year citing various challenges from the internal and external environment that impede their survival and growth. These informal businesses often do not survive their first year of existence, with anecdotal evidence citing various challenges from the business environment
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